Judge delays ruling in Sacramento’s arena eminent domain case

Sacramento officials had the former Macy’s men’s store building practically in their grasp Wednesday, paving the way for construction of the new Kings arena, only to have a judge say he would think a while longer about control of the vacant property.

One day after issuing a tentative ruling giving the city control over the Downtown Plaza building, a Sacramento Superior Court judge delivered a mild surprise by declining to make the decision final.

Judge Raymond Cadei still appeared sympathetic to the city’s eminent domain lawsuit but said he wanted to digest some last-minute legal arguments raised by the property’s owners.

“I’ll issue a final ruling as soon as I can,” Cadei said at the end of a nearly hourlong hearing.

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Although they had expected a final ruling at the hearing, city officials said they weren’t bothered by the delay. Assistant City Attorney Matthew Ruyak said he remains confident the city will get possession of the building, the last piece of real estate needed for construction of the $448 million arena, quickly enough to keep the project on schedule. Assistant City Manager John Dangberg said it might have been unrealistic to get a final decision right away “in a case this complex.”

The city sued the owners – CalPERS and some mortgage certificate holders – after negotiations broke down on the sale. The city wants control of the building so the Kings can begin demolition later this spring and start constructing the arena this fall.

CalPERS isn’t objecting to the city’s plans, but the certificate holders are. Their lawyer, George Speir, argued that the city mishandled the eminent domain process and his clients didn’t get a proper chance to object to the takeover. Among other things, he told the judge that the City Council’s decision to sue the owners in January covered only the land and not the building. The land is controlled by CalPERS while the building is controlled by the certificate holders, he said.

The city said it followed the eminent domain process to the letter. “We think the city took all the appropriate steps,” Ruyak said after the hearing.

Despite reserving final judgment, Cadei said the owners wouldn’t be hurt by the city taking control of the building right away. “Your clients’ rights to have fair compensation for (their) property are not compromised,” he told Speir.

If the city is ultimately granted possession of the building, a trial would be held later on price. The city has offered $4.35 million, while the owners have said it’s valued at $10 million on the property tax rolls. Ultimately, the Kings would pay for the building. The team bought the rest of Downtown Plaza for $36 million.

The eminent domain case appears to be the last major legal challenge to the project. The city still has to complete its environmental review and financing package, as well as finalize a development agreement with the Kings. Dangberg said the development agreement would likely go to a City Council vote in late April or early May. The city plans to contribute a $258 million subsidy to the project.

The new arena is supposed to open by fall 2016. If the timeline slips by more than one year, the NBA has the right to buy the Kings and move them out of town.